The restaurant sector took a bit of a hit this week with shares of Sweetgreen (SG -1.23%) taking the brunt of the move on news that consumers are cutting back in a lot of areas. Cava Group, another high-growth chain, also fell this week but Sweetgreen’s move hit double digits.
According to data provided by S&P Global Market Intelligence, shares of Sweetgreen had dropped 17.4% this week as of 1 p.m. ET on Friday and there may not be a recovery around the corner.
Questions about the consumer
There wasn’t any big news about Sweetgreen specifically, but this is a highly valued company that’s still losing money, so if the macro environment is getting weaker that could impact how investors view the stock long-term. And this week wasn’t good for that macro view.
Dollar General, Lululemon Athletica, and Ulta Beauty all reported relatively weak earnings and the theme from these reports was a struggling consumer. Spending isn’t stopping entirely, but consumers, particularly on the low end, are trading down and even giving up some purchases as inflation and the lack of higher earnings have hampered spending.
Sweetgreen’s financials
One of the easiest things to give up if you’re cutting back is dinner at a restaurant and that’s what investors are worried about. Sweetgreen still has a whopping $3.6 billion market cap, but just $649 million in revenue over the past year and it’s losing money.
SG Revenue (TTM) data by YCharts
That’s the financials of a company to take a risk on in the current economy and investors reacted accordingly. I am certainly not a buyer of this pullback and think there’s a lot for Sweetgreen to prove to win back investor confidence.
Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica and Ulta Beauty. The Motley Fool recommends Cava Group and Sweetgreen. The Motley Fool has a disclosure policy.